Track soars 04-22-98

CBS.MarketWatch.com

NEW YORK (CBS.MW) -- Don't take Track Data Corp. CEO Barry Hertz the wrong way. He says his company is in a strong position to compete in the crowded field of financial data providers.

But even he can't come up with a reason why his company's stock (TRAC)
TRAC, +0.00%
climbed 272.5 percent Wednesday on the back of an explosive rise Tuesday. Or why the stock turned back Thursday, down 3 7/8 to 5 7/16.

"I guess we?re getting painted with the same brush as all the other Internet stocks," Hertz told CBS MarketWatch. Track sells financial data to day traders through an Internet-based system. The company sees the Internet as a "big source of additional revenue and profits," he said.

Yet that's not enough to explain the rise in these little-known financial data providers, some of them with ties to the Internet. Market Guide put out a press release six months ago when it first signed the AOL deal.

"These guys cut deals like that all of the time," said John Kirkland, a Beverly Hills-based attorney who represented a group that unsucessfully bid for Data Transmission Network (DTLN)
dtln
last month.

The price rises "have left us all agape," said Robert Shenk, head of AOL's personal finance channel, which made the deal with Market Guide. AOL is one of the top financial destinations on the Web. The company says the site attracts 5 million regular users.

While the financial particulars of the AOL-led deal have not been released, Shenk confirmed that Market Guide would be able to share in some of the advertising and subscription revenue that the new AOL product area creates. That's in addition to any of Market Guide's premium reports that may sell on the space.

"It's a very aggressive deal for us as well," said Shenk.

Madness on the Web

The run up in financial data providers stock has left industry executives unable to determine the value of their own businesses, said Patrick Spain, CEO of privately owned Hoover's Inc.

"This is like the tulip mania of 1637," he said.

"Here's a company that's been public for a long time, that sells a commodity product that they've not made a lot of money on historically and that none of the people they compete against have made a lot of money," Spain said.

"The problem (with Market Guide) is that this is going to crash, in my opinion," he added. The shares went as high as 28 3/4 this week from about 3 several days ago.

But back to Track.

Revenue for the Manhattan company is about $50 million a year. The company's stock is selling at about 2.3 times sales, a far cry from Yahoo, the Internet search engine whose shares now trade at an astounding 45 times sales.

It's that kind of valuation gap that's behind the recent interest in well known and obscure Internet stocks, analysts say. The biggest Internet stocks have been rising to new heights every week for most of this year.

The small companies were until this week mostly undiscovered by investors.

"People are recognizing that demand for financial data is growing, and the Street is starting to recognize these companies," analyst Joel Krasner of First Albany. Tide's in, folks

The Internet tide lifted all boats in the group this week, including Market Guide, Telescan (TSCN)
tscn
, PC Quote (PQT)
pqt
and Data Transmission Networks.

"We keep thinking what have we done differently today that we haven?t done in the last nine months," said PC Quote CEO Jim Porter. "Who knows why the market decides to pay attention to certain things on certain days?"

Internet investor chatroom threads have a name for non-news related run-up in companies like Track Data. They call it the "CNBC effect." That's when the mere mention of a stock in the cable business news' morning broadcast sees the stock zoom as thousands of traders move in on it.

Yet by Wednesday, stock prices for most of the group had come down, including Market Guide. PC Quote was the most active on the Amex exchange, giving up most of its gains by closing down 1 9/16 to 2 13/16.

"It could be our turn tomorrow. I don't know," said Track's Hertz.

Kirkland thinks the DTLN bid made by his group woke the market up to financial provider stocks. But even that group, which includes Los Angeles music industry entrepreneur Jerrold Pressman, is no longer interested at these prices.

"At these prices, I don't think any of these companies are attractive for an acquisiton or anything else," Kirkland said. "I don't have a clue to what's driving this, and as far as I can tell nobody else does."

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